As Blockchain.com and Binance prepare to go public, Maxim Manturov, Head of Investment Advisory at Freedom Finance Europe, takes a look.
The cryptocurrency market has been hit hard in recent weeks, with the prices of many major cryptocurrencies dropping significantly. The Luna, for example, sold for around £94 just a month ago, but is now considered almost worthless. However, prior to this decline, major cryptocurrency exchanges publicly announced plans to file for IPOs this year, including Binance and Blockchain.com. While a month ago these investments were taken for granted, now there are questions about whether retail investors should invest in these companies.
Comparison of Binance and Blockchain.com IPOs
Blockchain.com can be considered a pioneer in the world of cryptocurrency exchanges. Founded in 2011, just two years after the first cryptocurrency, Blockchain.com now has over 37 million users on its platform and covers 200 countries. The cryptocurrency exchange now has 82 million wallets on its platform and has processed over $1 trillion worth of cryptocurrencies. A third of the transactions on the bitcoin network are handled by Blockchain.com.
However, even with this impressive range, Blockchain.com is losing ground compared to its competitors. According to CoinMarketCap, a resource that monitors 305 cryptocurrency exchanges and ranks them based on turnover, liquidity, trade volume and a reported trade volume reliability indicator, Blockchain.com is not only ranked 32nd. This figure alone makes it clear that the intention to include Binance, the world’s largest platform by trading volume, which occupies a respectable 1st place, in the CoinMarketCap ranking seems much more interesting to investors than Blockchain. com
Binance and Blockchain.com intend to go public this year. The competition to attract investors will be a constant battle for both companies. Investor motivations will vary. On the one hand, you will have a small investor who will only invest in one company due to limited funds. In this scenario, which is probably the most common, investors will have to choose, and all things being equal, their choice will likely be in favor of Binance, due to their current popularity. On the other hand, if an investor does not want to “put all his eggs in one basket”, but wants to invest in crypto-platform IPOs, simultaneous IPOs of two such companies will lead him to invest in both, diversifying certain risks.
Coinbase went public in 2021 and lost more than 50%. This has decreased further since the cryptocurrency crash and is now down to 80%. Crypto-IPO investors will wonder if they should expect a similar trend with Blockchain.com and Binance, and the answer is, possibly.
Cryptocurrency stock prices will be influenced by two key multi-directional factors. On the one hand, cryptocurrencies are increasingly embedded in economic relationships across the global economy. With their huge potential, cryptocurrency exchanges are worth a long-term investment. In the short term, however, investing in them is somewhat risky, especially in the current economic climate. This year has been marked by widespread increases in interest rates by central banks, including the US Federal Reserve. These regulatory measures are always accompanied by the liquidation of technology companies, which includes cryptocurrency exchanges. This is one of the main factors behind Coinbase’s downfall. Therefore, it is possible that we will see the prices of Blockchain.com and Binance securities fall in the year after the IPO.